Sunday, November 16, 2008

Needing A Lift

As American lawmakers contemplate a 25 billion dollar bailout of the Big 3 automakers, and as Canada considers following suit, let's take a moment to consider the absurdity of this situation.

American automakers have for years been committed to producing poorly built gas guzzling monstrosities, and their total failure to anticipate a changing marketplace has finally caught up with them. This isn't rocket science folks, and it's not as though the writing wasn't on the walls for the past, oh, twenty-five years. And now, finally faced with the stark reality that people simply don't want their cars, these free market privateers have turned to the public sector to backstop their ineptitude.

On Friday, Ontario Premier Dalton McGuinty met with executives from the Big 3 to hear their pitch for a cash infusion.
The presidents of Honda Canada Inc. and Toyota Canada Inc. were also at the meeting. Mr. Bryant stressed that those companies are not facing a liquidity crisis but wanted to ensure that any aid provided to the Detroit Three does not leave Honda and Toyota at a competitive disadvantage.
The Japanese car makers are doing just fine, thank you very much. For decades they have been in the business of making smaller, high quality, fuel-efficient cars. And now, to no one's surprise (except, seemingly, Detroit's) they are on top.

If the prospect of using taxpayer money to bail out bloated dinosaurs like GM isn't frightening enough, ask yourself what our federal and provincial governments are doing to assist enterprising home grown electric automakers like Zenn Motor Cars and Dynasty Electric Vehicles. The answer - nothing.

With the exceptions of the province of Quebec and the municpalities of Vancouver and Oak Bay BC, Zenn electric cars are not even permitted to operate on Canadian streets. Likewise for Dynasty's IT electric cars, whose parent company is being forced to shift production from Delta BC to Pakistan. And if their cars seem a little too...pedestrian, check out California's Tesla Motors, which is now producing the impressive electric Roadster to backlogged demand, and promises to deliver a $60,000 luxury electric sedan by 2010.

Surely these are the automakers that deserve a slice of that 25 billion dollar pie. Let Exxon Mobil bail out GM. If public money is to be spent in the auto industry, let us invest it in the future, and not in the past.


MD said...

All politics are local. Any Ontario government, regardless of ideological persuasion, will rush to the rescue of the auto makers. There are simply too many jobs at stake. Don't forget that our public health insurance already acts as a form of subsidy (the company health plans for employees in the States are killing GM for instance), but the auto makers always have their hands out for cash.

I'm not opposed to public investment in private industry. For instance, tax payer money more or less created the Canadian aerospace industry and its spin off jobs. But I wish they were a little more strategic about where to invest, a little less willing to reward private sector incompetence, and a little more willing to put strings on the money.

ottlib said...

If history serves as a guide to what is going to happen then we can expect:

The governments on both sides of the 49th parallel throwing wads of taxpayers' cash at the Big Three, with the goal of course, to save jobs.

The Big Three will then layoff thousands of workers on both sides of the border, to make themselves "viable for the long term".

The Big Three will still ignore market forces and continue to build sub-standard, gas guzzlers.

Market forces will again catch up to them and they will again come to governments for taxpayer handouts.

And then the whole cycle will begin again.

Red Canuck said...

MD - As Andrew Coyne said, those jobs will not simply evaporate. Bankruptcy means that GM will be forced to restructure, renegotiate with its creditors and with the unions and streamline itself if it wants to survive. Will jobs be lost? Yes. But that's not the fault of government, it's that fault of GM for running a shitty company for so long. Air Canada went through this, and came out better for it on the other side (in the sense that they are still flying). PanAm, once the world's largest airline, collapsed under its own weight and an inability to cope with deregulation. Jobs were lost, but other better structured airlines moved in to fill the void. Bankruptcy is a bitter pill, but in this case I think the American auto industry has to swallow it.

Red Canuck said...

Ottlib - I fear you are correct, as there are too many vested interests at stake. Obama was supported by people in the rust-belt who have been hit hard by manufacturing losses. He now owes them, and this is one way to go about it. But fundamentally, it's wrong. I wouldn't be sad to see the big 3 become the big 2, if that's what it takes for Detroit to finally wake up.

I mean honestly, what in God's name are they waiting for? With all of the billions they spend on R&D, why haven't they been able to mass produce an affordable electric car up until now? It's shameful.

Bowler said...

I agree with you, this all seems like a huge waste. At one time, many years ago, there were numerous American car manufacturers, ie. Dodge, Chrysler, Buick, Plymouth, etc., etc., that eventually consolidated into the big three. Its time for another trimming.

I think one of the areas governments must invest in over the next 5 years is infrastructure. Much of our North American infratsructure was built in the post-World War II era and is crumbling. Investment in this sector would also make for some interesting parallels to the New Deal era, ie. WPA, TVA, etc. Throwing money into the Detroit auto makers is throwing good money after bad. Infrastructure is an overdue investment and would be good for the economy. As Jerry Bickenbach once said, this must can be ventured.

Red Canuck said...

Bowler - I can't even use the term Oldsmobuick anymore, as Olds has disappeared.

And yes, infrastructure is in desperate need of upgrades. I think that was part of Obama's platform south of the border.

As Bickenbach would say, Princess Stress Canada Waaa!

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